10 Options For Your Property on Divorce or Separation

What can we do with the Family Home when we Divorce or Separate?

When a couple decides to divorce or separate, one of the most significant and emotional decisions they may face, is what to do with their family home.

It raises questions like:

• “Should we sell the house before the divorce is finalised?“
• “Where will we both live?
• “Who will get the house“?
• Or the key issue that most people have to solve:  “How do we fund two households, whereas before we were just funding one.”

Where you both live will impact on the children, the parenting arrangements you can agree, what schools the children will attend, and how much you have each month to live on.

Here, we outline some options that you might consider when trying to decide who should live where, especially when there are children under the age of 18 involved. If you cannot agree, family mediation can help you work together to solve the above key issue and help you to move on with your lives.

1)   SELL ON THE OPEN MARKET

• Look at your needs moving forward, take into account the mortgage capacity that you have and agree the split of the equity from the sale.
• This is a common method, especially where both parties are downgrading or there is a lot of equity in the home to provide deposits for both parties, or both of you have a good mortgage capacity.
• Remember in agreeing the split of the asset you need to consider where the children will be housed and what your mortgage capacity is.
• Helps to provide a clean break between you.

2)   ONE PARTY BUYS THE OTHER OUT

• You agree that one parent should remain in the former marital home
• You need to think about how the mortgage is paid, does the second party rent or buy?
• Can all equity be released, or do you need to have some form of agreement moving forward?
• To get a clean-break you will need to raise money to pay off the existing mortgage and any agreed equity to be transferred to the other party.

3)   RENT OUT THE FORMER MARITAL HOME

• This is not a common option, but it can work in certain circumstances
• Usually, when there is no mortgage (if you have a mortgage, you must tell your lender you are renting the property out and it could then become a buy-to-let and your interest rate may change)
• But if you are mortgage free in a prime location, the income could pay for two other rented houses whilst you agree what longer term arrangements can be put in place.

4)   CHARGE BACK (OFTEN JUST CALLED A CHARGE)

• Party one
  • Remains in the former marital home
  • Takes on the mortgage in their own name, thereby releasing party two from the mortgage
  • If at all possible, increase the mortgage to buy-out party two or provide them with a deposit
    • Has the deeds transferred to their sole name
    • Will not increase the sum owing by arrears or further borrowing
  • Party two
    • Is able to take out another mortgage and buy a property; or they can rent
    • Will place a charge on the former marital home to reflect the agreed percentage split of the equity
  • Both parties
    • Agree a fixed sum or percentage split of the gross or net proceeds of sale
    • Agree ‘trigger factors’ (sometimes called a determining event) to govern the release of the charge

5)   MESHER ORDER

• Not available to cohabitees
• Party one
  • Remains in the former marital home
  • Will be responsible for all routine maintenance and decorative repairs
• Both parties
  • Remain on the mortgage and deeds – this may prevent party two obtaining another mortgage and so party two may need to rent
  • Agree a percentage split of the gross or net proceeds of sale
  • Change the deeds from a joint tenancy to tenants in common
  • Will pay for structural repairs in proportion of their ownership
  • Agree ‘trigger factors’ (sometimes called a determining event) to govern the release of the charge

STANDARD TRIGGER FACTORS AND DETERMINING EVENTS:

• The youngest child attaining the age of 18 and / or finishing full time secondary education (could be 16 or 20 depending upon their education status)
• Prior written consent of both parties or further order from the court
• The death of the child
• The death of the parent living with the child
• Remarriage of the parent remaining in the former marital home, or cohabitation lasting 6 months+ (or by agreement)
• Failure to occupy the former marital home for a period of xxx months in any xxx month period
• Failure to occupy the property as their main residence
• Sale of the property

6)   FRIENDS AND FAMILY

• Can any close relation or friend go on the mortgage to help release the second party?
• Or can they provide a lump sum to buy out the other party?

7)   LEAVE IT TO THE CHILDREN

• Needs to be in a Deed of Trust* not a Will
• Right of abode created but unable to move as proceeds of sale would go to the children
• Usually only suitable when people are older

*What is a Deed of Trust?

A deed of trust, also known as a declaration of trust, is a legally binding document that outlines the ownership and distribution of assets, particularly property, between these parties.  It is commonly used when two (or more) individuals jointly purchase a property but wish to define their respective shares and rights.

A deed of trust specifies the percentage of ownership each party holds, details the responsibilities and obligations of each owner, and determines how the property will be divided in the event of a sale or dispute.

In the context of a divorce or separation a deed of trust can serve as evidence of the parties’ intentions and agreements, which can be considered by the courts. This ensures that their interests are safeguarded, thus promoting a fair and equitable arrangement.

8)   EQUITY RELEASE

• Only suitable if older
• Financial planning and/or legal advice highly advisable

9)   RE-CONFIGURE EXISTING MORTGAGE

• Done to help the family finances go further
• Can sometimes enable one party to re-mortgage in their sole name
• Can switch from repayment to interest only
• Can extend the term
• While many people do not like interest only, this can really help make an arrangement affordable now

10)  SHARE THE HOUSE

• The children remain living in the house
• Parents take it in turns to stay in the former marital home
• They stay at friends, family or rent when not living in the former marital home
• Takes a lot of working together and agreement

You may be able to agree another option to one of these ten. If so feel free to drop what you did or are considering doing in the comments section below.

If you can’t agree between you, family mediation can help you move forwards, or you can try an independent barrister review if you are unable to agree. We recommend good legal advice and financial advice on any agreement you reach.

There can be tax implications on the agreement you reach, especially if you are looking at releasing equity at a later date after your divorce. It is vital you are fully armed with all the information and advice you need to help you both reach a fair agreement.

Get in touch with us to book in a clinic appointment to discuss all your options to resolve your dispute. You can call us on 0330 999 0959 or email admin@mediateuk.co.uk for further information.